âOur view has always been for these two products that they are loans. Someone lends you money and you pay it back at a later date, âsays Rachel Gittleman, head of financial services outreach at the Consumer Federation of America, a consumer advocacy group.
But advocates of new financial products say too much regulation could stifle innovation.
âWhatever product you’re talking about, it’s new products,â Tate says. âThese are not the same products in their concept that people may be familiar with. “
Payday advances may not be getting the attention of regulators right now, but they could in years to come, he says.
The Consumer Financial Protection Bureau issued an advisory opinion in 2020 that certain advances offered through an employer are not considered credit under the Truth in Lending Act, which governs most types of consumer credit. Shortly after Rohit Chopra was confirmed earlier this year as CFPB’s new director, consumer groups sent a letter urging him to rescind his review.
How to approach these financing options
The lack of regulation and a flood of new products mean that it is up to the consumer to research, compare options and plan before using a new financial product.